ECONOMICS

Economics is the study of how societies efficiently use scarce resources to

produce valuable commodities and distribute them to satisfy the need and
wants of their members.

       It is also defined as the proper allocation and use of available resources for
the maximum satisfaction of human wants.

BRANCHES OF ECONOMICS

Economics is divided into two branches:

  

1.    Macroeconomics which deals with the economic behavior of the whole

economy or its affricates such as government, business and the like.

It is concerned about the gross national product, level of production,

unemployment rate, etc.

2.    Microeconomics deals with the economic behavior of individual units

or specific segments of the whole economy such as firms, consumers, price of
commodities and the like.

 
DIVISIONS OF ECONOMICS
 

1.          Production – the process of manufacturing goods needed by the

people to satisfy their needs.

2.          Consumption – the proper utilization of economic goods.

3.          Distribution – the marketing of goods and services to different

economic outlets for allocation to individual consumers.

4.          Exchange – the process of transferring goods and services from

one person to another in exchange for something.

5.          Public Finance – the activity of the government regarding

taxation, borrowings and expenditures

FACTORS OF PRODUCTION
 

       Factors of producing are economic resources that are necessary to produce

economic goods. They are the following:

1.          Land – natural resources

2.          Labor – human resources or manpower

3.          Capital – manmade physical productive capacity such as plants,

machine tools and the like.
 

4.          Entrepreneur – the person who organizes and coordinates all the

other factors of production to produce economic goods.

5.          Foreign Exchange – the foreign currency reserve used for

importing goods and services in the process of production.

THE LAW OF DIMINISHING RETURNS

       If states that when successive unit of a variable input (like farmers) work
with a fixed input (like one hectare of land ) beyond a certain point , the
additional product (output) produced by each additional unit of a variable
input decreases (Fajardo,1986)

SUPPLY AND DEMAND

 

       Supply is the flow of goods and services which the firms are willing or
can make available in the market at a given price structure.

Demand is the relationship between market price and the quantity

demanded, expressing how much of the same commodity or services one
consumer or all consumers would buy at a given real price schedule.

Price is the value of a product or service

The Law of Supply and Demand

 

       It states that when the supply is greater than the demand, the price of
goods or services decreases; whereas, if the demand is greater than the supply,
the price increases, and if the supply is equal to the demand, the price remains
constant.

MARKET MODELS
 

       Market is an impersonal set of pressures bringing together supply and

demand.

The different market models are the following:

1.    Pure competition – a market situation where there is a considerable

number of sellers offering the same products.

2.    Pure monopoly – a market situation where there is only one seller of a

particular good or service

3.    Monopolistic competition – a market situation where there is a

relatively large number of small sellers offering where similar but not identical
products.

4.    Oligopoly – a market situation where there are few firms offering

standardized differentiated goods and services.
ECONOMIC SYSTEMS
 

       An economic system is a set of economic institutions that dominates a

given economy (Fajardo, 1986). The following are the major economic systems
in the world today

1.          Capitalism. In this economic system, the factors of production and

distribution are owned by the private individuals or corporations.

2.          Socialism. It is the bridge between capitalism and communism. It

is a combination of capitalism and communism. Under this system,
the major factors of production distribution and industries are owned
and managed by the state, while the minor industries are owned by
the private sector.

3.          Communism. It is exactly the opposite of capitalism, where all the

factors of production and all the industries are owned and managed
by the state. It is also known as command economy, where private
property ownership is not allowed.